Key Advice on Life Insurance

 
The average life insurance policy isn’t very difficult to understand – you take out a certain kind of policy to basically get life insurance coverage to protect you and your family. So, if you die unexpectedly, the insurer will pay out on the policy to give your next of kin a lump sum or an income according to the terms of your agreement. In most cases you will pay for your life insurance policy on a monthly basis for as long as the policy is in force – the payments here are usually referred to as premiums.

It is critical that you read the terms and conditions of any policy before you buy it because this is where you will find all the information that you need to know before you proceed. The terms and conditions will give you an exact idea of what your policy will cover you against and what it won’t. All this may simply be common sense but there are other things you need to know about a life insurance policy before you take one out.

Here are a few tips you should consider before purchasing a life insurance policy:

•Consider buying a “break point” level of insurance coverage – better premium rates are given at coverage levels of $100,000, $250,000, $500,000 and $1,000,000.
•Make sure you obtain an illustration for the policy that you have chosen. If the insurer will not provide you with one, look for another insurance company.
•Always shop for a level-premium policy. Nobody likes a surprise increase in their premium payments! So, before you buy term or permanent insurance make sure your illustration shows that your premium payment is guaranteed not to increase over the duration of your coverage.
•Determine your desired duration of coverage so that you purchase the correct type of policy and keep your premium payments affordable. If you only need insurance for 10 years, then buy term. Also, check out multiple-quality insurance companies for their rates.
•Don’t be persuaded to buy riders. A very few number of policies ever pay under these riders, so avoid things like the accidental death and waiver of premium riders since they will only jack up your premiums.
•For 24 hours before your medical exam, keep sugar and caffeine out of your system. It’s best to schedule your exam early in the morning, and don’t consume anything but water for at least eight hours beforehand.
•If your premiums are much too high due to medical reasons or you are denied coverage, check if a group plan is available through your company. These group plans require no medical exam or physical.
When shopping for life insurance, don’t rush into buying expensive permanent life insurance before considering if term life insurance sufficiently meets your needs. Unfortunately, in many cases the fees charged for policies with investment features far outweigh the benefits. When you purchase life insurance, you’re betting that you’ll live, but also securing peace of mind in case you’re wrong.

Don’t leave your family unprotected in the sudden event of your death – after all, they are your most important assets.

Annuities for Seniors

If you are nearing the retirement age and want to secure your financial status for the future, annuities can work as ‘tax deferred investments of unlimited funds for life’. You may already know about the basic features of annuities. Here, let’s learn about annuities for seniors and how they can help individuals and families who are entering the retirement phase or the golden age of sixties.

While annuities provide several benefits in the form of increased rate of growth in savings through its tax deferred feature, high returns, and security, another important benefit that comes along with is life insurance or insurance against financial instability. You can invest as much as you want in an annuity, leave it there to grow as per the rate of interest promised to you, and withdraw the money when you need it. There can be several choices about how to and when to withdraw your money, but if you are looking for an alternate source of income, you can choose to receive an amount every month, lifelong.

A fixed annuity is often a good choice for seniors as it offers the promise of a steady income. Fixed annuities can be term certain if you want it to range over a particular time period, or it can be life annuity if you want to receive paybacks from the annuity till death. Several fixed annuities offer special features that can be useful for senior citizens. While an annuity with systematic or flexible withdrawal options may include an income paid to you for life and give you the freedom and pleasure of drawing your own pension, an annuity with an optional feature like principal guarantee may commit to return you at least the initial premium you had paid, when you surrender the contract. A few annuities, keeping the needs of the senior citizens in mind, attach the feature of a nursing home waiver. These actually relieve you of the surrender charges if you fall sick, at any time during the annuity period, and require to encash the annuity to pay for your nursing home bills. Apart from these, some annuities come with certain unique features, such as reduced fees and expenses on annuities for seniors, a reduced minimum investment for seniors particularly, no up-front sales charges or recurring fees, and of course, no surrender charges.

Most annuities also offer death benefits to ensure that the remaining value of the annuity passes over to the heirs or nominated individuals, if the annuitant dies before the annuity period is over.

The amount of payback for fixed annuities depends on the amount you have invested as well as on your life expectancy. Whatever be the amount, the assurance of a steady income is often very useful to senior citizens. For elderly individuals, this can be an open road to freedom. According to a survey by the researchers of the Guardian Life Insurance Company, New York , almost 71 percent of the population said ‘the idea of owning a retirement vehicle that provides a steady stream of retirement income seems very appealing’.

The Benefits of Annuity Insurance

All annuities, fixed or variable, share several common benefits. Here’s a summary of what annuities can bring to your retirement portfolio:

Ideal for Estate Planning
Proceeds from annuities pass directly to your beneficiaries without the delay, expense, and publicity of probate in most states. If you’ve ever had a loved one’s estate go through this time-consuming legal process, you know just what kind of advantage this is.

The Power of Tax Deferral
Because you do not pay taxes on earnings every year, your annuity is able to work harder thanks to tax-deferral. You will have to pay taxes on earnings when you withdraw your annuity’s gains, but at least you can decide when that happens.

No Contribution Limits
Contributions to other retirement savings vehicles, like 401(k)s and Individual Retirement Accounts, are strictly limited. Annuities, however, offer tremendous flexibility. You can contribute as much as you want, up to the limits imposed by the insurer, to take advantage of tax-deferral or variable accounts inside the annuity.

Flexible Payment Options
When you do decide to begin receiving payments, you can usually select one of the following methods:

Lump Sum distribution (a one-time payment)

Periodic distributions (you can take money only when you need it)

Systematic distributions (a fixed or variable amount is sent to you at regular intervals)

Annuitization (fixed or variable payments, guaranteed for the rest of your life)

Tax Control
The money inside your annuity is made up of two components — principal and earnings. Assuming your annuity was opened with after-tax dollars, you’re only taxed on your earnings.

Different distribution methods behave differently when it comes to taxes; for instance, Lump Sum, Periodic, and Systematic distributions exhaust all earnings (which are taxable) before tapping principal. Under annuitization, each payment consists of both principal and interest, spreading your tax liability evenly among payments. Through these distribution options, you have complete control over when you will pay taxes on your earnings.

Annuities are not perfect when it comes to tax control. If you should pass away while your annuity is accumulating, all deferred taxes on your growth will become due, which may reduce your annuity’s value.

Easy To Start and Maintain
Usually, a simple application, a check, and your signature begins your annuity. And, at the end of each year, you will not receive a 1099 for income earned within your annuity contract. That’s one less thing to worry about when April 15th rolls around.

Other Features
Annuities also do not offset Social Security benefits like bond, CD, and other investment income does.

Annuities are easy to establish and often come with a “free look period.” Your state of residence or the annuity contract will define a length of time (usually 20 days) where can cancel your contract if you decide it’s not right for you.

You can even exchange older, non-performing annuities into a newer fixed annuity with no tax consequences, thanks to Section 1035 of the Internal Revenue Code.

What’s not to like?

Tips on choosing and shopping for an Annuity.

The basics: Think of annuities as a retirement account with air bags. Buyers invest a sum of money in a particular annuity, and in exchange, they’re guaranteed a payment for a set number of years, or for life.
They tend to be purchased by people under age 40, people nearing retirement age and professionals who want to protect their assets.

Annuities are investments that provide peace of mind for people who want to protect their lifestyle in retirement and ensure they won’t outlive their savings.

There are two main types of annuities:

* Immediate Annuity- You invest a lump sum, and the insurance company begins sending you regular payments right away. You would decide in advance whether you prefer receiving a fixed amount for life or for a certain amount of years.

* Deferred Annuity-You invest one or more sums with the insurance company years before your retirement date. During these years, your investments have a chance to grow, tax-deferred.
When you reach retirement age (at least 59 1/2), the amount of your payment will depend on the total size of your annuity.

There are three different types of deferred annuities-each with trade-offs and risks:

*Fixed Deferred Annuity-Your lump sum investments are placed in a low-risk asset portfolio and earn a guaranteed annual rate of return until retirement.

*Variable-Deferred Annuity-You invest in stock and bond funds offered by the insurance company that holds your annuity. At retirement, your account can be worth more or less than your initial investment.

*Equity-Indexed Annuity-Your investment mirrors the performance of broad stock index, such as the S&P 500. The insurance company protects against market declines by guaranteeing a minimum return on your investment.

Annuities are a great retirements-savings plan: Unlike a 401(k), IRA or SEP (Simplified Employee Pension), you can contribute as much as you wish; your investment grows on a tax-deferred basis; and you can rest easy knowing you’ll receive payments for the duration of your contract.

But annuities may not be ideal if you already have assets saved that can produce enough income for you and your spouse during retirement.

Consider an Immediate Annuity if:

*You are near retirement age.
*You haven’t saved enough in your retirement plans to provide sufficient income.
*You need steady retirement income in addition to Social Security payments.
*You worry about outliving your savings.
*You have no family to support you if your savings run out.
*You want your spouse to recieve a steady income if you precede him or her in death.

Consider a Deferred Annuity if:

*You are under age 40.
*You are a likely target for litigation by former clients, creditors or a divorcing spouse. Doctors, lawyers and now even financial and real estate professionsal are at risk.
*You want to swap out of a poorly performing annuity or Universal Life Insurance policy. Through what’s known as a 1035 exchange, the IRS allows you to transfer the cash value of one insurance product to another without triggering tax penalties.

If an annuity makes sense for your needs, here’s what you need to consider when narrowing your choice:

*Calculate the payout. How much income are you likely to receive based on the sum you plan to invest?
*Verify returns. Look at how an annuity’s investment returns are calculated.
*Add up the expenses. Find out exactly what you’ll be charged in expenses and fees.
*Explore the death benefit. What will your spouse receive if you die before deferred-annuity payments are due to begin? Consider an extra fee to boost the annuity’s death benefit.
*Size up surrender fees. What will you be charged if you choose to cancel the annuity and withdraw your savings?

Now that you know what you need to look for, get out there and shop!